Doubts Raised Over EU VAT Reforms

By Global Tax Weekly

The European Union’s proposed VAT reforms is a polarizing topic. According to European Commissioner for Taxation, Pierre Moscovici, the so-called definitive EU VAT regime will make life easier for EU companies trading across borders, slash red tape, and simplify VAT-related procedures – “in short, good news for business, consumers, and national budgets, bad news for fraudsters.”

Au contraire, argues CFE Tax Advisers Europe, a Brussels-based umbrella association of European tax advisers. According to CFE, under the definitive VAT regime, SMEs will face “considerable difficulties and expense” in determining what rates of VAT to charge and, far from actually encouraging intra-EU trade, “the proposals will have the reverse effect.”

So, who’s right? Will the definitive VAT system be the best thing to happen to businesses in the EU in recent years, or a definitive tax disaster? It’s impossible to say. But that so many small businesses struggled when the EU began enforcing destination-based place of supply rules for VAT on electronic services in 2015 does not bode well.

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